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Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants

Anouk Faure () and Marc Baudry
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Anouk Faure: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This study investigates the nature of technological progress in six manufacturing industries covered under the EU-ETS, plus the power sector, and its effect on carbon price formation using marginal abatement cost curves. We adopt a technological frontier framework, which we calibrate to input and output data at the plant level from 2013 to 2017, with a directional distance function approach. Our results reveal that most of the time, technological progress resulted in inflating baseline emissions, despite decreasing the carbon intensity of production. In our sample industries, technological progress therefore leads to increase abatement efforts, raising the equilibrium price of carbon.

Keywords: Directed technological change; frontier analysis; EU-ETS (search for similar items in EconPapers)
Date: 2021
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Working Paper: Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants (2021) Downloads
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